How Much Home Can You Really Afford in 2025?

With housing affordability reaching historic lows, how can the average American afford a home in 2025? We explore state-by-state income data, explain our home buying rules, walk through a real-life case study, and offer tools to help you buy smart. After that, we answer your questions about an out of order Financial Order of Operations, a 50% raise, and employer stock purchase plans. ⁠⁠⁠⁠Jump start your journey with our FREE financial resources⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠Reach your goals faster with our products⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠Take the relationship to the next level: become a client⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠Subscribe on YouTube for early access and go beyond the podcast⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠Connect with us on social media for more content⁠⁠⁠⁠⁠⁠⁠ Bring confidence to your wealth building with simplified strategies from The Money Guy. Learn how to apply financial tactics that go beyond common sense and help you reach your money goals faster. Make your assets do the heavy lifting so you can quit worrying and start living a more fulfilled life. Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

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• 0:31Speaker 01

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• 1:04Brian Preston?

  Here is a big question that a lot of young people are thinking about. How much home can you actually afford in 2025?

• 1:12Speaker 03

  Brent, I am so excited to talk about this because housing has become this just very unique thing. It's almost like for people today that are not homeowners yet, it's almost like it's the white whale. It is like that unachievable goal that it seems to keep moving further and further and further away. And so, one of the questions we want people to be able to answer is, okay, when it comes to buying a home, when it comes to making this significant life decision, how do I do it? And how do I do it well?

• 1:40Brian Preston?

  Well, I think a good place to start, and I was really, it's interesting when I get a resource that shares data so people can actually use this data to figure out where they fall into things. There's this interesting map that's come on our, in our purview of

• 1:57Brian Preston?

  How much people have to make to afford homes in each state?

• 2:02Speaker 03

  Yeah, this is the median income recommended for buying a three-bedroom home by state. So how much does my median income need to be in this state to buy a three-bedroom home?

• 2:15Brian Preston?

  It's provided by data from Visual Capitalist.

• 2:17Speaker 03

  That's right.

• 2:18Brian Preston?

  If you haven't looked at their stuff, it's very interesting. But look at this. I mean, there's a spread. Now, I guess if we were trying to figure out the lowest, I've been told by a team, West Virginia, West Virginia. Seventy-one thousand.

• 2:27Speaker 03

  Yep, down there.

• 2:28Brian Preston?

  And then if you want to go to the highest, we have to look out to California.

• 2:32Speaker 03

  I think it's actually Hawaii is the highest.

• 2:34Brian Preston?

  Oh, yeah.

• 2:34Speaker 03

  Two twenty-nine.

• 2:36Brian Preston?

  Look at that, down there, floating off the coast of Texas there. I know it's not actually off the coast of Texas, by the way. But it is one of those things, because I was immediately drawn to, because I know we have a lot of listeners out in California, so I saw that two-ten. But you're right, Hawaii's at two-hundred-and-twenty-nine thousand. But still, all the numbers, like here in Tennessee, where we are, one-hundred-and-twenty-one thousand. That is, and what I know is, when we compare to the median income of the typical American household, these numbers are higher.

• 3:05Speaker 03

  Yeah, if you just averaged all fifty of these together, the average is about a hundred-and-twenty-four thousand dollars. Well, if you think about a hundred-and-twenty-four thousand dollars being the recommended income, and we know that right now, the median household income in this country is right at about seventy-six thousand dollars. They're saying that you need about a hundred-and-seventy, a hundred-and-sixty percent of the median household income in order to buy a three-bedroom home, that's daunting. And I think it's causing a lot of people to potentially make, I don't want to say dangerous, but aggressive financial decisions that are putting them a little bit further down the risk spectrum, I think, than they probably ought to be.

• 3:43Brian Preston?

  I know we have tried to be very proactive on this, and that's why if you go to moneyguy.com/resources, we actually have a home buying calculator. So this way, you can come in, yes, listen to this conversation we're about to give, where we give you even more insight. But then later, you can go back to our website and actually put in your specific numbers and see how this all lays out for you, so you can make that good, personal, of personal finance. ...decision to maximize this opportunity.

• 4:09Speaker 03

  So when it thinks about, when you think about buying a home, what are some of the things that you should do? Well, number one, we want you to think about our home buying rules. Again, you can go to moneyguy.com/resources, check out our whole home buying hub. We want you to recognize that there are a few rules that you should adhere to. I'm gonna put, I'm gonna make sure that I'm in this location for at least five to seven years. If it's my first home, I don't have to put down 20%. I can put down less. And maybe the most important one, when it comes to affordability is that my housing costs cannot exceed 25% of my monthly gross income. And if I can answer those three questions for a home, I'm likely gonna put myself in a sound financial decision. So one of the questions that people, that

• 4:51Speaker 03

  I imagine you have is, okay, we saw what data visualists said, okay, based on what we think, this is what the median income should be to be able to afford a home. But what about based on my income? How much income could I, should I have in order to afford a home? Or based on my income, how much home could I afford? And so we wanted to walk through a case study.

• 5:11Brian Preston?

  Oh, good old Money Guy case study. What would it be without us throwing some numbers into a spreadsheet? I love it.

• 5:17Speaker 03

  So we're gonna assume that, obviously, we're gonna follow the Money Guy rules. We're gonna assume that you have a 5% down payment. So you're gonna, whatever house you buy, you're gonna put down 5%. And then we're gonna assume that the prevailing interest rate right now is about 6.5% for a 30-year fixed mortgage, which I think is in line in most parts of the country. So then the question becomes, at different income levels, what size home does that mean that you could afford? And first, when we said, okay, what if you just make the median household income, $75,000 household income, what size home could you buy with those assumptions? It's about a two, just under a $250,000 home.

• 5:52Brian Preston?

  I think a lot of those people, you need to move to the Midwest.

• 5:54Speaker 03

  Right, like that's, yeah, obviously. What about if you have an income that's like $100,000 household? That would suggest that you could afford a home that's right at about $330,000. And then if your income is $125,000 as a household, based on the Money Guy rules, that would suggest that the home that you could buy would be about $409,000 for a home that you would be able to reasonably afford. Now, a lot of people say, Brian, This doesn't, okay, I see it and I get it and understand, but in my area, it's really hard to find homes in this price point.

• 6:30Brian Preston?

  This is one of those scenarios where it's hard for me because I'm an optimist on everything and I'm still optimistic that something has to give because we can't have young people not being able to afford houses in the United States. So I don't know what that thing that gives, whether it's, you know, income outpacing inflation, where we get some equilibrium because maybe real estate's not appreciating as fast as it was, you know, during that high inflationary period, but something has to give. But in the meantime, I do think that we can fall back on some key things. There's some takeaways. The first thing is, is it's okay, you know, we share this all the time, in the financial

• 7:11Brian Preston?

  order of operations, we do want you processing through the steps, but it's okay to even take a step back. If you have key moments in your life, like you're trying to set roots in a community and you're trying to figure out, hey, do I need to boost up my emergency reserves so I can have that three to 5% down payment? It's okay if there's a moment in time that you actually have to take a step back on purpose to fulfill those life goals.

• 7:34Speaker 03

  And remember, money is nothing more than a tool that allows you to achieve the goals that you have. And so one of the things you really need to do is sort of right set your goals. And a lot of people, they do have the goal of financial independence. That is something they want to work towards, but a lot of folks say that, hey, before I get to financial independence, I'd like to be a homeowner, right? And so if that's one of your goals, it's okay to use your savings, to use your strategy to move towards that goal, even if it's not necessarily progressing you through the food. That's okay for in that position. The other takeaway we want you to have is that even though the traditional thinking was if you're going to buy a home, you got to do 20% down, 20% down, 20% down, that's not necessarily true. If this is your first time home purchase, we think you can put down less.

• 8:18Speaker 03

  Now, that doesn't mean that you only have to put down the very minimum, only 3%, but you ought to play with the numbers based on your savings rate, the capital you've been able to accumulate and the housing in your area, what's an appropriate and reasonable down payment? Maybe it's 10%, maybe it's 15, maybe it's 20, but you get to define that for yourself.

• 8:38Brian Preston?

  And then this is, this is the big thing I want people to realize. It's a difficult time right now, but a house doesn't have to define your financial security and your success financially. We have a number of clients, especially in these high cost of living areas in the coastal communities, whether you're thinking about New York, whether you're thinking about California, San Francisco, any of those areas. We have people who work, make great incomes, they build up a lot of financial independence through assets by investing, and they never, they rent it, the entire process now. And even some of them buying their first home, we've shepherded that process, buying their first home when they move to a lower cost of living area, buy that dream home in retirement.

• 9:21Brian Preston?

  You are not defined by just the house you live in. You can still create community, even if you're paying rent on that. I know that this is less than ideal from what a lot of people start out thinking, but that's why I also say, don't let your success, too many Americans count on their house being their biggest financial asset. And Bo, that is a big flaw to it. It is what we call a use asset. You can't eat your house. You have to go take down more debt, you have to sell it. It's a very illiquid use asset. So build up your independence in those assets that we're always trying to help you build through the Money Guy Show and specifically the Financial Order of Operations.

• 10:04Speaker 03

  And we love helping you guys figure out how to do that. That's why every Tuesday at 10 a.m. Central, we like to show up right here and answer your questions. Speak to the things that you are curious about. I think it's hilarious. Hilarious, that wasn't a good word. I think it's hilarious, the chat's coming in, people are really trying to decide if we're live right now. Is this pre-record? Is this a premiere? What are these guys? Guys, this is live. This is live.

• 10:27Brian Preston?

  I will say, give them credit, because I was like, guys, the data, and we didn't, there was even stuff that's kind of like in the brainstorming session that we didn't throw up. I was like, this almost feels like a show. But that was, but we did decide that it was so important that to get it out there, because if it's a show, it goes on the editorial calendar, it's going to take weeks, maybe even a month to get out there. And this data was just too important. So no, indeed, we are live.

• 10:50Speaker 03

  We are live. And being live, we love to answer your questions live. So if you have a question that you would like for us to weigh in on, we have the team out in the wings collecting your questions, because we believe that there is a better way to do money. So with that, Creative Director Rebe, I'm going to throw it over to you.

• 11:08Speaker 04

  I'm ready. Colby P. has a question to continue some talk about housing and affordability. It says, "I'm 23 and on step six of the food."

• 11:17Speaker 03

  Wow.

• 11:17Speaker 04

  "I'm saving for my first home in a high-cost area. To keep my monthly payment at 25% of my income, I'd need to put 40% down." That is a lot. "Would it be smarter to go ahead and put the 40% down upfront, or do 20% and then keep the rest in a high-old savings account, paying a bit more each month? What do you think? Uh, interesting concept, or is he getting too fancy with it?"

• 11:43Speaker 03

  Well, Colby, let's think through, why do we do the 25%? Like, why is that a thing that we, that we put into housing? Is because we don't want you to get into the situation where the cost of just keeping a roof over your head becomes so expensive that when that unknown, unknown thing happens, when there's a reduction in force, when there's a job change, when you get laid off, when something like that happens, that now, all of a sudden, you're in this spot where you're like, "Uh-oh, I can't make next month's rent payment. I can't make next month's mortgage payment." It's why we want you to have a fully-funded emergency fund that sits there as a fund for emergencies of three to six months of living expenses. And we want your housing to be at a reasonable cost

• 12:28Speaker 03

  that even if you had to pivot, even if you had to go do something else that maybe is not the ideal thing for you to be doing, you could go out and hopefully create enough income, enough replacement income to be able to cover the cost of that housing. My nervousness, Brian, with him just putting down 20%, and that balloons the housing cost to 35% or 40% of his monthly take-home is, that just doesn't leave a whole lot extra. It doesn't leave a lot left. You agree, disagree, want to fight on this one?

• 12:58Brian Preston?

  No, no, I, but there's, I have so many components. So when I saw Colby's question, immediately, because we had a, we did a studio tour. This is probably two weeks ago. Nick, Nick and I did this studio tour, and a great guy. And he was an attorney, and he was a young guy, just like Colby. Sounds like he's a young guy doing big things. And, and he asked me some life questions about his career. And I was like, "Go find who the best person who does what you want to do. You know, let them mentor you, get some toolage under them." And he was like, "But I'm probably going to..." And I was like, "And you might have to move to do that." And he's like, "Oh." I'm house hacking. Hmm. I just bought a duplex. And I'm like, this is something, sometimes for younger people,

• 13:39Brian Preston?

  be careful, Colby, trying at 23 to already try to fit the house solution in, because the biggest thing sometimes as a young person you can do, and I'll get to the answer of his question next, but I want to talk about the mindset stuff first. Is I think successful people, and Bo, you were guilty of this too, I was guilty of this. We're always trying to go through the checklist of life as fast as possible because we're so just used to being rewarded for being good and fast at life. But I'll tell you, there are certain decisions you might be making that that is a mistake. And your career, where you do your career, where you, because building that shovel of your, your annual income is a big, big thing. So that's the first thing. And housing, by the way, locks you down. Mm hmm.

• 14:23Brian Preston?

  You lose, that's why man, oh, man, do people panic when they lose their job and they realize they're in a high income situation and they might have to move to replace that income. How many people also, as we're pulling people, we're not, not everybody's working from home like they were. So they all moved to these different communities and now the jobs are, Required to come back. Communities are required to come back and it's really creating some weird distress in the real estate marketplace as well. Just, I would, Colby, I had to say that first because as 23, you're still trying to probably figure out where you're landing on this job versus career. Now, I get the feeling you might potentially have a career, since you're already talking about step six at age 23. Must be doing alright. That's, and that means, and that means you're probably making a strong enough income that,

• 15:08Brian Preston?

  this is the other thing I think financial mutants have struggled, especially financial mutants struggle with, is how do you free yourself to say it's okay to do something outside of just saving, saving, saving and building? And that's why I love 25% as a guiding light is because everything you make over that, you can free yourself to say, I'll spend it, I'll consume it, I'll do something. Unless you now, look, I'll get, put the asterisk or the caveat, because we put the personal in personal finance. If you're part of the FIRE movement, FIRE movement, next endeavoring, you might be leaving at 45 or 50, well, of course, you have to have a higher savings rate. But if you're going more of the traditional route. I'm okay with somebody making sure they're getting, you know, 25% saving and then they want to,

• 15:51Brian Preston?

  if you want to load it up so that you have that big down payment. Because it's exactly what Bo was saying. You just don't want to get in a desperate situation where you lose your job or some big life change happens and now you have to start making desperate decisions because you really didn't have as much financial foundation underneath you as much as possible. Debt specifically levered debt and that's what mortgages, real estate investing, it is you're buying a very big asset for typically very minimal down. That's great while markets are appreciating. That's great while good times rocking roll and income's flowing in, but all of a sudden when the music stops and everybody's trying to find their chairs, you find that that lever part, that the debt can get very dangerous very quickly.

• 16:35Speaker 03

  Can I, I just want to add, Reba, can I add one more thing to this? Of course. I just think it's worth noting, Colby, you're 23, which I, who knows, maybe you've been working for like five, six, seven years. I'm going to assume this means you're like pretty early on in your career. And so even the thought around like making a housing choice right now, and I don't know if you're married, have kids, any of the other circumstances, but I just know for me personally, when I was 23, life just changed a lot from 23 to 28. Like there's a lot of things that happened in there that impacted the type of housing that I desired, the location I wanted to be in, all of those things. And so if you're already at this young age, trying to kind of like stretch to make buying a house work,

• 17:18Speaker 03

  it might be okay to just breathe and pause for a moment to make sure that when you make this huge significant life decision, you're making it at the right time. And I can tell you this because I did this wrong. Like a lot of what we share with you guys is us telling you mistakes that we made. I bought my first house way too young when I had no business buying it way before I should have. Like it was just, it was a little foolhardy. And I look back on that and I thought, man, I put a lot of stress and a lot of pressure on myself. Unnecessarily where there were other solutions that I could have implemented that would have likely worked out just as well, if not better. So at 23 years old, I would just measure two or three times before you like, plant that flag. You agree? Any wisdom?

• 18:03Brian Preston?

  No, look, I wanted you to buy that house as fast as possible because that locked you in.

• 18:07Speaker 03

  Yeah, I could.

• 18:08Brian Preston?

  He wasn't moving, he wasn't quitting to go somewhere else when he bought a, bought a house in the hometown where, where my business was at that time.

• 18:14Speaker 04

  Yeah, that was more of a Brian decision, not a financial decision.

• 18:18Brian Preston?

  So consider that too, is that there's, there's the other side of it is that's why you do need to be careful. Now, look, it's worked out swimmingly well for Bo and for me as well, but I'm just telling you, you might want to think about that too, is because it is a big life decision when you set roots and buy a house.

• 18:34Speaker 03

  Yep.

• 18:35Brian Preston?

  Hence the five to seven years in the home buying checklist.

• 18:38Speaker 03

  That's right.

• 18:38Speaker 04

  No, that's great. Colby, great question. I hope that that helps shed some light on your decision-making. Remember, we have a lot of great home buying resources at moneyguy.com/resources. We have a whole home buying checklist of what to consider before you make that big decision and also a home buying calculator, which we've discussed in the beginning portion of this show that will help you see how much home you can afford.

• 18:58Brian Preston?

  You, you know what I like about this new set is Bo's drink is so close to me.

• 19:03Speaker 03

  No, no, no.

• 19:05Brian Preston?

  I just stole his thunder.

• 19:07Speaker 04

  You just opened your beverage.

• 19:07Brian Preston?

  It was on my side. I think we could probably say this is pretty close to my side.

• 19:11Speaker 04

  We're gonna have to draw a line in the middle.

• 19:12Brian Preston?

  Because you know, I think Bo plays the game. I think he plays the game. He waits until I'm in the middle of an answer and then he tries to figure a time to pop the top on his drink. And I just saw it so close to my side. I was like, I'm putting an end to this craziness right now.

• 19:25Speaker 03

  I think, um, I think that that's, that's.

• 19:28Brian Preston?

  Now, did you see how clean I did that? So I didn't get anywhere near your drinking area.

• 19:31Speaker 03

  No, no, no, no fingers on there.

• 19:33Brian Preston?

  Bo is not a germ person. We could drop an M and M right now and he'd jump out there and eat it. So it says, he wasn't worried. I was more worried for him.

• 19:40Speaker 03

  My methodology is I always finish my coffee first before I move to my other beverage. So I'm, it's more, it's more like an, uh, you can call it like my drinking order of operations. I do this one first and then I move. It's, I call it the do.

• 19:52Brian Preston?

  I still think there's more strategy that goes into the timing of popping that top than he's letting on though.

• 19:58Speaker 03

  Hey, can I do, can I do a few housekeeping things?

• 20:00Speaker 04

  Of course.

• 20:01Speaker 03

  Uh, we had, uh, so if you guys, one, if you're not subscribed, you should subscribe right now to the channel so that we know you're out there because we have new content coming out almost every day of the week. On Mondays, we have either reacts or making a millionaire coming out and we just had a brand new react hit, uh, yesterday. And if you do not know what a red tail hawk sounds like, you're gonna wanna go check out that react so that you can understand what that sounds like. We also have-

• 20:31Speaker 04

  And then also read the comments so you know what he means.

• 20:34Speaker 03

  We also have making a millionaire that comes out every Monday. So if you're not subscribed, you haven't checked that out. We had one come out last week that was fantastic. You should go check this out. It's for millionaires and mentors in the making and we're covering a wide swath. It's people right at the very beginning of their journey to people dead in the messy middle to people who have made it and are on the sweet side of the financial equation. So if you haven't checked that out, do that. Tuesdays we have our live streams. Wednesdays, we have our little, uh, mini shows, our little compact, uh, heavy hitter shows. And then Fridays, we obviously have the big show that comes out. So if you're not subscribed, you should be so that you know every time we have-

• 21:08Brian Preston?

  Did you say the mini shows?

• 21:09Speaker 03

  I did.

• 21:09Brian Preston?

  Cause I, I cut those out last week.

• 21:11Speaker 03

  That's why I did this right now. So I wanted to make sure.

• 21:14Brian Preston?

  Good, good pick me up. By the way, it is interesting. Things you didn't know and you learned, you're this many days old when you learned it is that the, we've been lied to our whole life. So we found out when, by just the comments section, that what the sound we think for bald eagles, which is the, you know, the, the whole, you know, where they come in. It's really a red tail hawk, according to our audience in the comments section. And, and, and, cause they said a bald eagle actually sounds more like, um-

• 21:44Speaker 03

  A crying baby.

• 21:44Brian Preston?

  No, no, no, no, no. They, they said a seagull.

• 21:46Speaker 03

  Oh, a seagull.

• 21:47Brian Preston?

  Like a seagull with the, and sure enough, we went and looked and it was, it was a little over, and we have hawks around us all the time. And I love hearing, you know, you can tell when a hawk is, is, is in pursuit of something. This also, another way, now, somebody fact-checked this, cause I'm doing this off memory. The MGM lion roar at the beginning is supposedly a tiger.

• 22:09Speaker 03

  Like the tiger's roar was more impressive.

• 22:11Brian Preston?

  So somebody fact-checked that, but I've always been told that. So I'm, how many other things are we being, like the sound effects that, that are being pumped in? Like, I know it's fist fight. So if you watch A-Team. Oh, they don't, it doesn't really sound that way when you hit somebody.

• 22:25Speaker 04

  We knew that one, though, come on.

• 22:26Brian Preston?

  But, but it is just interesting. These are things that make you go, hmm.

• 22:30Speaker 03

  Was it me and you, I promise we're gonna get back, was it me and you a couple of years ago, we went on that, we went on this deep rabbit trail, watching people make sound effects? Was that, was that me and you, where like you watch a YouTube video and it shows you?

• 22:41Brian Preston?

  It shows you he has other friends. I might have done that.

• 22:43Speaker 03

  No, I'm pretty sure.

• 22:44Brian Preston?

  We've done so many goofy things, I've already forgotten.

• 22:46Speaker 03

  Fact check, it is a tiger.

• 22:48Brian Preston?

  See?

• 22:48Speaker 03

  Look at that!

• 22:49Brian Preston?

  Look at that. We've been lied to. But they lied to us about our finances too, so that's why we're here to not only open up the curtain to the sound effects, because our audience is smart too, but we're gonna help you do that with finances.

• 23:03Speaker 03

  I love it.

• 23:04Speaker 04

  I love it.

• 23:07Speaker 04

  Somebody in the chat said, well, we allow a red-tailed hawk sound on the show.

• 23:12Brian Preston?

  Um, peaches and herbs.

• 23:15Speaker 03

  We told him before the show, don't bring this up.

• 23:18Brian Preston?

  No, I sang a little bar in that react video.

• 23:22Speaker 04

  You did.

• 23:22Brian Preston?

  And none of you reacted. I was like, man, nobody knows that song. And then my team, my audience, put that, and I didn't know that who sang that. I just knew the song from my childhood. You know? It was cool.

• 23:35Speaker 03

  He was about to start saying, he was about to.

• 23:37Brian Preston?

  The moment didn't hit me.

• 23:38Speaker 04

  I guess so. You'll have to go watch the react and hear him sing. And I think you do the red-tailed hawk sound in the react as well, so it's just really full of Easter eggs.

• 23:47Speaker 03

  If you wanna see more Brian sound effects, you should go, you should go check out that react video.

• 23:51Brian Preston?

  I mean, I mean, let's see if I can do a seagull, AKA bald eagle.

• 24:00Brian Preston?

  It's not as good as the red-tailed.

• 24:01Speaker 03

  It doesn't, it doesn't, it doesn't evoke the same feeling.

• 24:05Brian Preston?

  Patriot Pete.

• 24:07Speaker 03

  That was his name.

• 24:08Brian Preston?

  Patriot Pete.

• 24:10Speaker 04

  Okay, would you like to do another question?

• 24:13Brian Preston?

  Yeah.

• 24:13Speaker 04

  Are we ready?

• 24:14Brian Preston?

  Did we run off the entire audience?

• 24:16Speaker 03

  There's four people left in the livestream right now.

• 24:18Speaker 04

  There may be a few more people here, listening still. All right, Shan has a question. It says, "How do the money guys feel about selling the winners in a non-tax advantaged brokerage account to fulfill the emergency fund steps?" It feels like I'm cheating the foo.

• 24:36Speaker 03

  In a non-tax advantaged brokerage account to fulfill the emergency-

• 24:42Speaker 04

  So he must not have an emergency fund.

• 24:44Speaker 03

  It sounds a bit-

• 24:45Brian Preston?

  Non-tax advantaged, so it's an after-tax account?

• 24:49Speaker 03

  Selling the winners-

• 24:50Brian Preston?

  But you're gonna pay taxes on that.

• 24:52Speaker 03

  Yeah, yeah, if you, if, yeah, so, okay, if you do not have an emergency, if you do not have an emergency fund, Brian, we hold the thing up. We have this nine-step process called the Financial Order of Operations, where you do, you know, step one, then two, then three, then four. And step four is a fully funded emergency reserve. Well, a lot of people get it out of whack, and they don't find the foo early enough in their journey. And they might have a big taxable account that has a bunch of invested assets. They've got mutual funds, and stocks, and ETFs, and stuff like that. But they have a paltry emergency fund. And they just have like this little emergency fund that might be just bridging you month to month, or maybe one or two months of expenses.

• 25:26Brian Preston?

  They have access to cash trap is what they got.

• 25:28Speaker 03

  That's right. And so in that situation, we will tell people, "Hey, you really ought to think about, consider selling some of your brokerage assets so that you can fully fund that emergency fund." Now, whether you're selling winners or losers, in my opinion, is sort of, that's a non-issue right here. The good news about selling losers is you get to harvest the losses. If you've sold winners, then you have to pay capital gains. If you can sell some losers and some winners, you can net to zero, you can make it tax-neutral. But, but that is sort of, that's like, that's like a side quest. The big thing here is if you don't have an emergency fund, you should, and you need to have one, because you don't know when the unknown unknowns are coming your way.

• 26:10Brian Preston?

  Yeah, you don't want to end up making a desperate decision just because you got cute with how you did your investments. And that's why I would say, it's weird to say, "I'm gonna sell my winners," because that implies that there's probably some taxable gains. I'd rather you just be tax-smart. And it's the same way, when we have people come in as prospects, and they become clients, we immediately try to figure out, how do we get them where they need to be, but do it in the most tax-advantaged way? Now that could come in several forms. We look at your entire portfolio and say, look, we got to get you off this access to cash because that's not as good as a fully funded emergency fund. And we're going to look and see what your losers are, your gains, what we think the prospects are going forward on these investments and make that choice. And then we might even take into account, hey, you have a bonus coming next month?

• 26:55Brian Preston?

  Because maybe there's a timing element that fixes this as well. That's why you got to do this 360. You got to look at all the components. It's just, it's hard to give you a rule and just say, yeah, go sell the winners. That just doesn't connect with all the different variables that go into good personal financial planning. And it is the personal part of financial planning.

• 27:16Speaker 03

  And I want to be clear, the little last part of Shan's question says, it feels like I'm cheating the foo by doing this. And I want to be clear, you're not, you're not cheating the foo. You got the foo out of order and you got lucky.

• 27:28Brian Preston?

  You did foo-ish, which we know is foolish.

• 27:30Speaker 03

  Yeah, it's no different. Oh, I have this car that I financed for 84 months, but I can afford, that's not, no, that's, you just, you got it out of order and you didn't get caught naked, but, you know.

• 27:43Brian Preston?

  Definitely some skinny dipping probably going on there, though.

• 27:45Speaker 04

  All right. Good answer. Shan, thank you so much for submitting the question and for being with us on the live stream today. Burning Phoenix has a question next for you.

• 27:57Brian Preston?

  Oh, what does a burning phoenix sound like, I wonder?

• 27:59Speaker 04

  Oh, I don't know. It says, if I've recently received a large pay increase, 50% plus, which is very exciting, congrats, how long should I wait before considering my new pay for things like the 23/8 rule and the 25% housing rule? Should I wait a year, two years? How long?

• 28:25Speaker 03

  Well, I definitely want you to make sure that this new income is here to stay. If you're doing a math crime and you've got like a sign-on bonus and you're including your sign-on bonus as part of your annual compensation, that's what's causing it to be a 50% increase? Well, that's obviously a temporary thing. But if this pay increase is legit and this job you've taken is legit and you have a reasonable belief that it will and should continue on, it's not a unique anomaly for this one year, then I think that you can start using it for the rules that we have like 238 or like your home buying rules. But if I just change jobs and I'm like, "Man, Brian, I just changed jobs. I got a 50% pay increase. Immediately, I'm going to buy a more expensive house."

• 29:09Speaker 03

  That may be a little bit aggressive because generally when good things happen or when good things in your life go on, you want to think about the dionic treadmill.

• 29:19Brian Preston?

  Well, but is the way the heart of that question was asked was actually looking for the opposite? Whereas you get the big pay raise and you say, "Hey, because my income is so much higher now, does it justify me to go ahead and boost up bigger car, bigger house?"

• 29:35Speaker 03

  Well, that's what I was saying. I think you got, my opinion, you just changed jobs.

• 29:40Brian Preston?

  Cause he's gonna look at his number, he's gonna look at, he now has this higher income, but he's gonna see the requirement to use that higher income and it's gonna be much higher than what he was making, so his assets haven't caught up. So he's probably feeling a little squeezed by that. And I think you're on the same page. Is that, look, I think that when it comes to consumption, I like the fact of slowing the roll of making sure this sticks. That way, signing bonuses, RSUs, all these one-off things that might be boosting income because you had a good year. But I do think that it's not uncommon, like we look at the Millionaire Next Door formula that we've talked about for years. You know, that's where you take your income.

• 30:20Brian Preston?

  Times your age divided by 10 and you figure out are your investments, your net worth higher. And if it's twofold, you're a prodigious accumulator of wealth. If it's one time, then you're just an average accumulator. And if it's under, then you're really behind the curve. Well, the problem is for somebody who's under 40 years of age, you just haven't had enough time for your assets to keep up. And that's why you'll see a lot of things, even if you use our net worth dashboard tool. If you go to learn.moneyguy.com, I think there's nothing wrong when you have huge pay raises and it skews your data, especially on your income versus your assets, to do like a three year moving average to kind of moderate out or smooth out those huge income elements.

• 31:03Brian Preston?

  But when it comes to consumption decisions, I want you to be as conservative as possible because it just scares me that you have a good year, you start making lifestyle choices. It could come back to bite you really quick.

• 31:16Speaker 03

  And I just, again, I'd spread them out. I gotta, I gotta do, I got a new job, I got a big pay raise. Let me enjoy this for a while. Okay, maybe now we want to upgrade the car.

• 31:24Brian Preston?

  You're spot on with the hedonic treadmill.

• 31:25Speaker 03

  Let me enjoy this for a while. Okay, maybe now we want to upgrade the house. Okay, let me enjoy that for a while. Spread those things out. You get to have more happiness longer.

• 31:33Brian Preston?

  Good stuff should be spread out. Bad stuff, stack it in as fast as possible so you can get back to your copacetic, you know, level of happiness as fast as possible. That's the way the hedonic treadmill works. That's why lottery winners are horrible at this is they get a big windfall of money and they just go more, more, more. Boats, houses, cars, and then they wake up one day and go, man, I just, where's the emotional fulfillment? I thought I was going to get out of that. I like spreading out good decision, you know, good celebration moments like the new car, new house. Those things should have some distance between them so you don't smell the new car smell anymore before you move into the bigger house. That's where people screw that up all the time. Make the journey as rewarding as it should be as you reach these successful moments.

• 32:17Brian Preston?

  Don't stack it all in at once.

• 32:19Speaker 03

  Love that.

• 32:20Speaker 04

  Awesome. Burning Phoenix, thank you for the question.

• 32:23Speaker 03

  You want to hear something funny?

• 32:24Brian Preston?

  Yeah.

• 32:25Speaker 03

  Because apparently, so I get to see the chat, right?

• 32:28Speaker 04

  Oh.

• 32:28Speaker 03

  And like, apparently sometimes during the live chat, ads will pop up or whatever and people, it's, it looks like, and everyone is like affirming this, we just had an ad pop up for bacon.

• 32:38Brian Preston?

  Bacon?

• 32:38Speaker 03

  Like bacon, like bacon is advertising on the Money Guy channel. I'm for that.

• 32:43Brian Preston?

  It's like a specific brand of bacon?

• 32:44Speaker 03

  I don't know, but I just, I'm like, big bacon fan here. It's on brand.

• 32:49Speaker 04

  Oh, man.

• 32:50Speaker 03

  I'm just trying to say little things to affirm, because people still don't believe that we are live right now. They think that this is like AI-generated, like we're, that's how we're doing the questions right now. This is real. This is us. I want you guys to know that.

• 33:01Brian Preston?

  Really?

• 33:02Speaker 03

  Mm-hmm.

• 33:02Brian Preston?

  Okay.

• 33:04Speaker 04

  You're not sure it's real?

• 33:05Speaker 03

  This is us.

• 33:07Brian Preston?

  Oh, I'm here.

• 33:07Speaker 04

  You're not sure if this is real life?

• 33:12Brian Preston?

  We had, we just had a Making a Millionaire guest that, that made a reference on when she realized about debt paying off with the Matrix, and I thought it was a very, so we very well, you know.

• 33:22Speaker 04

  This could be the Matrix.

• 33:24Brian Preston?

  Exactly.

• 33:25Speaker 04

  Mm-hmm. Good to know. I'll watch out for that. All right, Michael C. says, "What is the best way to save up for large, expected expenses that aren't necessarily emergencies? For example, living in an aging house and needing to replace the fence, the deck, the windows, et cetera." Thanks.

• 33:46Speaker 03

  I, I'll tell you, I love sinking funds. You know, the idea of a sinking fund is this is fund I put like sort of on the side for a known expense that's coming, and for most folks in most circumstances, it's above and beyond in addition to my emergency fund. So if I know I have something coming up, like, man, okay, I've got the roof that I've got to replace, or I want to start saving for a new car, or there's some thing I know I'm gonna have, one of the things I might think there is, okay, based on how much I want to save, based on the amount of money that I'm gonna be putting towards my future self,

• 34:20Speaker 03

  In the ideal scenario, I would save above and beyond that 25% for whatever that sinking fund is. So I, you know, I'm gonna have to put a roof on. I'm gonna start saving X number of dollars for X number of months so that when it's time to replace that roof, I've got the money there already mentally accounted for. Now, in the circumstance where your income or the living expenses or whatever creates an environment where it causes you to deviate from the 25% savings, that's okay, so long as the goal is justifiable and you work through that adjustment period quickly. Meaning, okay, I gotta back down my savings a bit because I know I'm gonna have to replace the roof. So I'm gonna save for that roof, but I'm gonna save as aggressively as I can, as fast as I can. As soon as I get there,

• 35:04Speaker 03

  I'm gonna get right back on the savings train, get right back on the foo. I think that known coming expenses are awesome and in my opinion, way better than unknown coming expenses.

• 35:14Brian Preston?

  You said the key thing though. These, this needs to be in addition to your emergency fund. The trap I think financial mutants will fall into is that they will, because this, this, if you know you have big like house down payment, car purchase, you know, replacing windows, you know, all the, all the things, AC unit, whatever the big upcoming expenses, it needs to be in addition to the emergency fund. That's why I liked you talking about sinking funds, because the, the trap is if you have this, you know this is coming up, and then you have all these things happen where you buy a new car, and then all of a sudden the AC goes out and you have to put the new eight, $10,000 AC unit on, all of a sudden your emergency fund is less than three to six months. You've gotten yourself

• 35:58Brian Preston?

  in that dangerous territory where you're making desperate decisions. So I don't want you to have a false sense of security where you are building up these sinking funds and you tell people, yes, I have three to six months saved up. But do you? Or have you just built up to cover these expenses that for sure are happening? Now, there are curveball things. We've had young people come to us and say, hey, I know five to seven years in the future, I want to have a house down payment. So I'm going to go ahead and boost up. And you know, that's five years in the future. So probably some of that probably could go into that, that zone of emergency funds since you, this is a decision years in the future. But for things like you said, like windows and, you know, house repairs, cars,

• 36:40Brian Preston?

  these things are for sure happening. So I think that they go into addition of emergency funds. They don't deplete that.

• 36:46Speaker 03

  And it's okay with this is just a high yield savings account. I mean, right now, like money market mutual funds still paying above 4%. So if you, even if a seeking fund, it's not like you have to like put it in the piggy bank. You can still have it sitting in an interest bearing account, earning interest. It'd be silly not to do that.

• 37:02Brian Preston?

  Yeah.

• 37:03Speaker 04

  Fantastic. Well, Michael C. Thank you for the question. I really hope that helps as you think that through.

• 37:10Speaker 00

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• 38:10Speaker 04

  Caleb S. has a question up next. My wife and I are trying to plan for the future needs of a special needs child. We're on step eight of the FOO. How do we plan for needs that are not fully known with a four-year-old with special needs?

• 38:27Speaker 03

  Again, this is one of those unknown unknowns. This is a life thing that happens. And obviously, there are a number of different things you have to think through and consider, but there are some financial implications you want to think about. Brian, you've talked about this a lot in terms of how you've navigated and thought that. What was your mind, mind process and thought process as you've kind of thought through this?

• 38:50Brian Preston?

  You know, full disclosure, I don't have it all figured out because I think anybody who has a child that, you know, their life is just different. There's a lot of elements to the, I want to go ahead and free you as the parent. I think sometimes, especially as financial mutants, we feel like we have to have it all figured out. Just free yourself from that. It's okay. Enjoy the journey because even though your child might not be able to do everything that you might have thought when you first had this, this awesome baby, there's still a lot of special sweetness that comes from having the, because the way they process the world is different. I know for my daughter, she's just a happy builder. I mean, it's just, it's a really sweet thing.

• 39:35Brian Preston?

  So I would, you know, I want, I want to mention some tools so you have something to use is ABLE accounts are something that keep getting stronger and powerful because, you know, states are more coming online, they increase the thresholds. But you do need to be aware of that, you know, some key things happen with social security and so forth and benefits integration when your child becomes majority age, that you need to know those limits. So that's why I want to tell you tools like ABLE and so I don't screw up the, what's the, what's the website I usually tell people to go research? It's like.

• 40:13Speaker 03

  NS or?

• 40:17Brian Preston?

  Is it NR?

• 40:19Speaker 03

  AA?

• 40:20Brian Preston?

  Just like a national resource, ABLE, Bo will figure it out, dot org or something.

• 40:26Speaker 04

  Is it ABLE NRC dot org?

• 40:28Brian Preston?

  It might be. It's going to tell you all the different states and tell you which which resources, but you can look into that. But you're going to probably need to definitely, your estate planning is going to look different. Your trust planning is going to be different. So I would just, don't put it all on yourself at once, but just know over the coming years, you're going to want to bring in an attorney to help you work through how your assets integrate, because you have to plan for after you're not here, how do you structure it? Because I think our, even with ABLE accounts, you have to be careful that you go out there and load up these assets because you want to make sure your child has assets when you're not here. Well, there's special structures. You have to do that so that you don't blow up some integration with benefits and the community and other things like that. I know that, I hate when I give an

• 41:12Brian Preston?

  answer that gave more, I gave you breadcrumbs, but it's just because all this is so personal, because I don't know what your income, I don't know what your level of assets, because there is a social safety net depending upon where you live in the country, and all that has to be integrated into how you're planning and building your assets as well. So that's why I have to give you the, it depends, and that doesn't feel good, but hopefully I gave you some resources

• 41:35Speaker 03

  there. You said from, from a mindset standpoint, because again, it sounds like Caleb's child is four years old. I think what I've heard you say in the past is one of the things you did is you were more conservative in your assumptions, meaning that you planned to be able to, more conservative in your assumptions, more aggressive in your saving. Like, hey, I know this is what I would do otherwise, because you know, I want to have retirement and do college for the kid, dah dah dah dah dah dah. But because I recognize the weight that there's going to be someone I might have to take care of for longer than the standard trajectory, it just causes me to be a little more conservative in what I assume I'm going to have as a rate of return or timeline, and be a little more aggressive in how much I save and how I fund that, because I'm saving

• 42:16Speaker 03

  for multiple retirements, not just mine and my wife's, but also for my kids. And so I think as you approach that, and as you think about how you prioritize, it'll even inform decisions you make around where you live, what type of house you live in, the kind of automobiles that you purchase.

• 42:33Brian Preston?

  And I would say at four years of age, you do need to make big life decisions. Like, we moved, so by the time my daughter started kindergarten,

• 42:42Brian Preston?

  So we can have this special school system, this special school. But it's still, we had a good public school system for my oldest daughter and then we moved to this this area. So there was a special school for my youngest. And that, at the time, I think, and this is, I want to say, share this experience, share so that Caleb can hear this for themselves. I thought this was gonna be the silver bullet. You know, you find this brilliant school, you pay a fortune for it and you think this is going to fix. Cause I still was in the thought that I could find a silver bullet that would fix the issue. It didn't fix it, but it gave me peace of mind knowing that I had checked the box and done the best I possibly could to let my daughter become the best version of herself.

• 43:26Brian Preston?

  And there's a peace that comes when you know you through the kitchen sink at giving happiness, giving resources to something. But I just want to prepare as a parent who's gone through this journey. And now she's 15. I've got a whole nother journey of decisions we have to make on as she approaches adulthood, which is not gonna be the easiest thing. It actually gives me pause, but it's just part of the journey. But I just tell you, you don't have to feel like if you're trying to solve it, you'll get peace. It's amazing the ability of the human mind to build comfort and peace, you know, and find a copacetic level of happiness from this hard journey. And you'll have dark days, but you'll have good days, but you're gonna make it through this and we'll continue.

• 44:11Brian Preston?

  I mean, I know we've done some resources. I don't know if they're out to the public because we're still working on the scenes, but there's been things- We got some stuff in the background. We got some stuff in the background that will hopefully be able to help people like Caleb as you're trying to figure out to make sure you are giving your child the best opportunity possible, financially as well as through life. That's great.

• 44:31Speaker 04

  That's great. Thank you for sharing. Caleb, thank you for asking the question and being here on the livestream today, too.

• 44:37Speaker 04

  All right, ready for the next one?

• 44:39Speaker 03

  Yes, ma'am.

• 44:40Speaker 04

  Coco Foro Toro asks, "I had to dip into my emergency fund, and now I'm struggling to build back up my emergency funds. I've paused investing, but should I continue doing both? I'm nervous about missing out on ABB or always be buying.

• 44:58Speaker 03

  Oh, yeah.

• 44:58Speaker 04

  Thanks, Money Guy team."

• 44:59Brian Preston?

  But she kind of answered this question right there with the way she asked that.

• 45:03Speaker 03

  Mm-hmm.

• 45:05Speaker 03

  Here's my opinion. You gotta get the emergency fund back. Like, as much as we want you building, as much as we want you to have your dollars working for you, your emergency fund, Brian, will you hold the thing up? There's a reason that outside of employer match, emergency fund exists before all of the other saving, all of the other building, all of the other growing. So Coco, what I would tell you to do is, man, get so creative in how you can get step four fully funded as quickly as possible. It might be cutting your expenses down to the quick. I mean, it might be cutting out Netflix, cutting out eating out, cutting out the subscription. Whatever those things are, to get your footprint as small as possible, to be able to fully fund that, get that done,

• 45:49Speaker 03

  and then you can get back on the savings side. Or you might be in a situation where, hey, okay, I gotta go figure out a way to increase my income, whether it be through my current vocation or a side gig, side hustle, picking up something on the weekends, whatever that thing might be. Those are really your only two expenses if you want to speed up your timeline. You either have to spend less, get your footprint down, or you have to make more, increase your income, to be able to do that. But what you don't want to do is have yourself be in a situation where you don't have cash. Because when you don't have cash, it puts you in the place where you do make desperate decisions and you end up in step number three. Will Brian hold the thing up again? You end up in step number three, high interest debt. Because you know what people do when they don't have cash and don't have an emergency fund? They just start to swipe.

• 46:33Speaker 03

  And that is a hole that gets deeper and deeper and deeper. We have a great slide illustration that we're going to show at some point in the future that really drives home just how detrimental compound interest can be. It's one of Brian's, or how detrimental compound interest can be when it works to gage. It's one of Brian's favorite illustrations we've done.

• 46:49Brian Preston?

  Um...

• 46:52Brian Preston?

  Coco answered their own question and the fact that that first sentence was, "I used some of my emergency fund, but I'm having trouble getting it filled back up." Well, that that shows me that your income is not at such a level and the savings rate that it lets you take that emergency fund, then put it right back in there. It's taking you some time to build up. That means that you're susceptible or in the danger zone that if something bad happened, you'd have to make the desperate decision. And that's the part that's catastrophic. Bo just hit on it is that when you see that credit card debt is over 20%, when you see that what typically, whether it's medical emergencies or a car accident, or it's these things that you're not counting on.

• 47:37Brian Preston?

  And I just don't want you to fall prey to, you know, because we're financial mutants. We always want to maximize. We're trying to look for opportunities, but you're you're running astray. If you if you move on too soon without fixing this, you got to triage your situation. But use harness the energy of your frustration that it's taking you a while to do the things that Bo was talking about, the two levers, whether it's make more income, cut your expenses. So that you feel the pressure, you feel that the time, because that's the most valuable resource that you're also missing out on. It's not only the potential to hit the high interest rate. It's also that you have a timer in the background of every month that you don't invest. That should elevate. That should feel bad.

• 48:21Brian Preston?

  So that keeps you motivated to be the best version of yourself to get out of this as fast as possible. So harness that negative feeling to to get serious, to pinpoint laser focus and get yourself back on the track as fast as possible. Love it.

• 48:35Speaker 04

  That's great. Coco Foro Toro, thank you for the question. Ken B's question is up next.

• 48:42Brian Preston?

  By the way, Coco, is that is that just like coconut?

• 48:46Speaker 04

  I don't know. I don't think so. Honestly.

• 48:48Brian Preston?

  Okay.

• 48:48Speaker 04

  Yeah, could be either way.

• 48:51Brian Preston?

  I know some cocos. That's why I jumped to that. But then I was like, I have a lot of drinks I like that are cocoa, you know, coconut inspired. So it could be that too.

• 48:59Speaker 03

  All this is going on in your mind, wasn't it?

• 49:01Brian Preston?

  Well, we're going on a cruise this summer.

• 49:03Speaker 03

  Oh, of course.

• 49:03Brian Preston?

  So I've been watching so many cruise videos recently and every drink it seems like in the Caribbean has coconut in it, which I love. You can never get enough. Just like lime is great. Coconut's great. You put those things, there's lots of opportunity there.

• 49:18Speaker 03

  Lime and we were all thinking, right? Are you one of those people who, before you go on a trip, like when you book a cruise or you're gonna go to a place, are you like, even after you've booked it, are you then the person like, I'm going to watch the YouTube videos, I'm gonna read every TripAdvisor?

• 49:33Brian Preston?

  I think half the fun is the preparation.

• 49:35Speaker 03

  I bet you, you probably spend as much time looking at researching, thinking about the trip as you do on the trip.

• 49:40Brian Preston?

  There are so many things in my life, big purchases, I will over-research it to the nth degree. I mean, I had a dear client, she's passed away, but me and her husband, we talk about her all the time, is that she, me and her had a common ground because they wanted to buy an RV. And forever, we were talking about all the research that she was doing on these, and I was like, you actually enjoy the shopping.

• 50:03Speaker 03

  The research is the fun part.

• 50:05Brian Preston?

  So it makes me just thinking about, because I'm very much the same way. So of course, when I'm going, it's just like, I'm going to Epic Universe in the next week.

• 50:13Speaker 03

  Let's go.

• 50:14Brian Preston?

  So I mean, I know, if you don't know, you don't know. Theme parks are our jam too. So I just told you cruise ships, theme parks, this is, if you want to increase your opportunity to probably run into me in the wild, those are the two places you have to be. And I've watched, I'm worried I've over-prepared for Epic Universe. I've watched some videos I probably shouldn't have of the ride experience, but I can't wait.

• 50:35Speaker 03

  I've not heard one person say who's experienced it now that it's under-delivered. You know what I mean?

• 50:39Brian Preston?

  No, I'm super, I'm worried the crowd level's gonna be high. I was like, how did we not go to one of the pre-days? But we didn't. I mean, so we're gonna just go in with the huddled masses and see how this thing goes.

• 50:51Speaker 03

  It's what, I almost feel like I get to live vicariously through him. Like I get to experience it in seeing his excitement. Then when he comes back, I get to hear all about it. It's, I think it's awesome.

• 51:00Speaker 04

  It's almost like being there.

• 51:01Speaker 03

  It's almost like.

• 51:02Brian Preston?

  So if you're an epic universe in the coming week, we might cross paths.

• 51:07Speaker 03

  You know, we ought to do.

• 51:07Speaker 04

  For Brian Preston in the wild.

• 51:09Speaker 03

  We ought to get you one of those, um, uh, what's, it's not called a selfie stick, but whatever the thing is that holds the GoPro, the stick you walk around with and just have you walking around the theme park that way. That would be, wouldn't that be good?

• 51:21Brian Preston?

  Without it now, I would love to do that because I watch so much of that type of content. But I'm so worried if y'all knew me personally, I don't take a lot of pictures.

• 51:32Speaker 03

  This is not your thing.

• 51:32Brian Preston?

  I don't because I'm always trying to just enjoy the moment.

• 51:35Speaker 03

  You're taking mental pictures.

• 51:36Brian Preston?

  Become very deliberate to say, okay, let me, and I don't even know if I could do it. I'm the old man side of me might kick in where, but it's, um, I don't know.

• 51:47Speaker 03

  We'll see.

• 51:48Brian Preston?

  I do want to run the channel, but who knows?

• 51:50Speaker 04

  Maybe one day. All right. Are you ready to go on to Ken B's question?

• 51:55Speaker 03

  Yes, ma'am.

• 51:57Speaker 04

  It says, I'm 33 years old, making 120 K in Indiana.

• 52:01Brian Preston?

  Wow.

• 52:01Speaker 03

  Nice.

• 52:02Speaker 04

  I'm looking to go to graduate school in three years. Indiana has a very generous 529 tax credit of 20% on state income. Does this move up the foo with tax savings?

• 52:17Speaker 04

  Meaning should he prioritize the 529, I believe.

• 52:20Brian Preston?

  That's a state credit.

• 52:21Speaker 04

  Mm hmm.

• 52:21Brian Preston?

  So credit is different than deduction.

• 52:24Speaker 03

  So Indiana has a very generous 529 tax credit on 20% on state income. Does move the food tax, uh, so I, I'm not going to research this right now on the spot. Um, 20% sounds a bit, uh, or maybe is it 20% of the contribution you get to write off your state tax? I'd have to know.

• 52:41Brian Preston?

  I'd have to go read it.

• 52:42Speaker 03

  I'd have to know what it is, but the question is to say, there's a tax incentive around me saving for this thing. This is less of a foo question and more of how are you going to pay for a thing question? I mean, like, hey, if I go to a.

• 52:55Brian Preston?

  Three years is less, is short term.

• 52:57Speaker 03

  Yeah. Like if I go to a restaurant, am I going to pay with cash? Am I going to use my credit card? Am I going to use a gift card? That's kind of the way we're thinking about this. If you're going to pay for grad school anyways, and the way that you're going to pay for it is you're going to cash flow it, you're going to come out of pocket, by all means, you should definitely think about doing that in the most advantageous way possible. And so if using the 529 is just a short-term conduit, I put money in, and then I pull money out, so I can take advantage of the tax deduction, there is nothing at all wrong with that. We actually see a lot of people do that, who still, even while their kids are in college, will fund 529s current year, and then take distributions the same year because they want to continue to get that state tax benefit. So it's really, the thought process is less, should I use

• 53:39Speaker 03

  the 529? It's, okay, if I'm going to go to grad school, what are the most optimal ways for me to pay for this? And should I pay for all the semester upfront, or do I pay for it monthly, or as it goes on? Are there costs associated with it? Those are the things that I would be thinking through.

• 53:55Brian Preston?

  And I'll answer it in the context that Ken asked it, and the fact that I think that where this fits into the financial order of operations, obviously, you know, things that are coming up in the next three years should be boosted levels of your emergency fund. But then, once you have the money allocated and saved, now this becomes more of a financial mutant question, is how do I maximize the structure to get as much money as possible? Because remember, as a financial mutant, your money should go, you know, 3%, 5%, 7% further than your peers, because you're just willing to do stuff that everybody else won't do. And I think this is part of it, is that, yeah, if you have to take some of your cash that you saved up for graduate school, and you're going to go throw it into a 529, even

• 54:40Brian Preston?

  though it's only going to be there for a short period of time to maximize a tax benefit, do it. I mean, that is just financial mutant 101. I mean, there's so many things in my life, whether it's stacking up how I make big purchases, to see if they take credit cards, or something, because I just, I like, if I can make 2%, if I can make 3% here and there, that stuff adds up, as long as it's also built into the context of, it didn't break the cash rule. Because I really do want you to respect emergency reserves.

• 55:10Speaker 03

  Can I throw one thing out there that's a hot take? You can. This is one of those things, it's like, Beau, don't say it. Don't go there, don't bring it up. I'm excited.

• 55:16Brian Preston?

  Do you say hassle factor?

• 55:18Speaker 03

  Well, I'm just, you're, here's what I hear, you're 33 years old, you're making $120,000 a year, which is awesome, and it's incredible. And so, one of the questions that I would ask you, and I just want to make sure you've done this analysis is, hey, I'm going back to grad school. What's the why behind going back to grad school? Now, it may be, hey, I just want to increase my education, and that's fine. There's nothing wrong with that, if it's something you place value on. But I would do an ROI calculator, like, is going back to grad school going to add some utility? That's going to justify not only the cost, but also the time it's going to take away from me at this stage? A lot of people, again, this is my opinion, so write this down in pencil.

• 55:57Speaker 03

  They will end up defaulting to higher education without really thinking through, okay, why am I doing this? Is this actually going to add tangible value to something I'm trying to accomplish down the line? Whether it be increased education, whatever it is, or additional pay later on in life? I just don't want you to say, okay, well, hey, I've done a lot, and just grad school's the next thing, and I'm going to go check the box. I want there to be a reason why you're going to take on this additional commitment, additional cost, additional time. And just like everything else, any financial decision you make, you want to make sure the ROI, however you define that, is justified.

• 56:33Brian Preston?

  No, I, I, I agree. I think that's a good point, because I've given advice, real life experience. I've had financial planning people, or people with finance degrees, but then they need to go be eligible, sit for the CFP, and they're like, I can go back and get a master's. And I'm like, or you could do it this way, which would be more cost effective. But then I think about, like, Jonah here. I told him, go back, yes, because I want you to be able to sit for the CPA exam. Go do that last year of school, even though, you know, we know where you're going to start working.

• 57:01Speaker 03

  Yep.

• 57:02Brian Preston?

  I still would love for you to go do that extra year, so that you could be eligible for the CPA exam and the other requirements. So, it really is, it's more of a personalized decision, but make sure the why intersects and, and, because, look. College has gotten expensive.

• 57:17Speaker 03

  It's gotten real expensive.

• 57:18Brian Preston?

  So you better make sure, that's why, big hack I tell people is go check out community colleges and other things. Your diploma will look the same as somebody who went four years at that expensive school versus two years. You have to pay attention to the costs, and that's why if you're running up more student loan debt than what you're going to make when you come out of school, that ROI component gets really scary. And I love education. Everybody knows that. I always tell people when I give speeches, I consider education the ladder of opportunity, because you can start from the humblest of places, but if you just, if your brain works in a great way, and you can educate yourself to do things. But we have to be careful that it doesn't, people don't use that goodwill

• 57:59Brian Preston?

  of education and the opportunity it creates, that they've created these profit centers or costs that now are disconnected. It's all back to intrinsic value. If you're paying something more than what it's worth, it's just hard to get ahead. So, as a person who loves education, has worked in education and done things for years, I just want you to be educated as you make those decisions. Measure twice, so that you don't fall into a trap.

• 58:24Speaker 03

  Love that.

• 58:26Speaker 04

  Fantastic. Ken B., we really appreciate you being here during the livestream and asking that question, and as always, we hope it helps. Want to do one more from Wes?

• 58:35Brian Preston?

  All right. Let's see what Wes has got.

• 58:37Speaker 04

  Says, "My company has a very generous stock purchase plan with a 15% discount. How does this fall within the FOO?"

• 58:46Speaker 03

  Man, Wes, I'm so glad you asked this. I dropped my sticky notes, but I remember the question. I'm so glad you asked this, because people ask us all the time, "Hey, I have this employee stock purchase plan." And for those of you that don't know, what this means is that every month, or every pay period, or every quarter, I'm allowed to defer some of my salary, some of my pay, and I can actually buy stock in the company for whom I work, which is a pretty neat thing. And not only can I buy stock in the company, they're actually going to sell me, sell it to me for less than it's worth. They're going to give me a 15% discount. So, if our stock price is $100, I get to go buy it for $85. It's a pretty-

• 59:26Brian Preston?

  Wait, there's more. A lot of them will choose the lowest

• 59:28Speaker 03

  There you go.

• 59:29Brian Preston?

  Either the beginning of the quarter or the end of the quarter. So sometimes it's even bigger than a 15% discount. Keep going.

• 59:36Speaker 03

  And so then the question becomes, okay, well, how do I think about this? Well, when I hear 15% discount on something that's like readily, you know, readily available and easily liquid, to me, Brian, that sounds a lot like.

• 59:50Brian Preston?

  Step number two.

• 59:51Speaker 03

  Step number two. What's the step number two?

• 59:52Brian Preston?

  That get that free money.

• 59:53Speaker 03

  There it is.

• 59:54Brian Preston?

  Get that free money. Now, there is a caveat.

• 59:57Speaker 03

  Of course.

• 59:58Brian Preston?

  Is that what do we share with people when you have your human capital? That's your hours and your wages. Don't we need to keep that separated from your investment capital over the long term? Because you're just running a risk if you put all of everything with your employer, plus your wages, there is a risk.

• 1:00:14Speaker 03

  You need to have a plan. So we love ESPPs and we tell people, take advantage of them to the full extent. But what we don't want you to do is becoming so overly concentrated that you've got the ESPPs and maybe you also have RSUs and maybe you also have options to where all of your liquid wealth is tied up in your company, because exactly what Brian said. You're now concentrated in the company, both from a human capital as well as a liquid capital standpoint. So if you are going to participate, you ought to have some strategy. Okay, I'm going to do the ESPP, but once I hit 18 months or whatever your plan requires, and I hit that qualifying disposition, I'm going to begin selling that off. Or maybe if you don't even have the requirement to hold, we know a lot of folks who will buy the ESPP today, immediately sell it. They're going to pay the ordinary income down the discount,

• 1:00:59Speaker 03

  but they're still going to be in a better situation having sold that because they were able to take advantage of the 15% discount. So just make sure, whatever your circumstance is, you have a plan for how you're going to navigate that moving forward. But I love ESPPs. I think they are certainly worth taking advantage of.

• 1:01:15Brian Preston?

  No doubt.

• 1:01:16Speaker 04

  That's great. Thank you for the question, Wes. Like Bo said earlier, you're missing out. If you don't subscribe to the channel, let us know you're out there watching and stay up to date on all of the content that we're releasing throughout the week, whether it's Financial Advisors to Reacts, Making a Millionaire, mini shows, or our classic Chalkful full episode all about personal finance and hopefully giving you a little more of that confidence so you can focus on what really matters, not just all the dollars and cents. So thank you for being here. As always, we're so glad we get to do this with you every Tuesday at 10 a.m. Central.

• 1:01:49Brian Preston?

  So what y'all don't know is behind the scenes, we actually had three people sitting in the studio today.

• 1:01:55Speaker 03

  Lives through the audience.

• 1:01:57Brian Preston?

  Mix of interns, new hires. Kind of fun thinking about, because Bo and I got to give the whole abundance cycle speech. And I just, I think it's worth mentioning, we do not take for granted that we get to come and hang out with you every week, multiple times a week now, and we load you up, give you as much free stuff, and you guys fulfill the abundance cycle in quantity. You know, we have planted the seeds, you know where our heart lies, is the heart of educators, and you show up and consider going and hiring us. And I appreciate every one of you who goes to aboundwealth.com and does the work with us. It really just, it keeps this thing going, and we don't take it for granted one bit.

• 1:02:41Brian Preston?

  So we'll take advantage of all the free stuff. At moneyguy.com/resources, it's legit, and we want you to lean into that as much as possible, because what I love about the heart of the abundance cycle, you can do this for years, and you're gonna know this works, because we have no ask until you actually reach a level of success that your financial life actually gets complicated. Now, we've had quite a few questions today that have highlighted the thing we share all the time, is that money is a tool. It's not the goal. If you don't have your why lined up and understand what you're actually building for, I think you're gonna find it's just not fulfilling, it's just not gonna let you maximize this life that we have. And we're gonna keep leaning into that and loading you up.

• 1:03:24Brian Preston?

  I'm your host, Brian Preston, Mr. Bo Hanson, Money Guy team, out.

• 1:03:28Speaker 03

  The Money Guy Show is hosted by Brian Preston and Bo Hanson. Brian and Bo are partners with Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the Securities and Exchange Commission in accordance and compliance with the securities laws and regulations. Abound Wealth Management does not render or offer to render personalized investment or tax advice through the Money Guy Show. The information provided is for informational purposes only, may not be suitable for all investors, and does not constitute financial, tax, investment, or legal advice. All investments involve a degree of risk, including the risk of loss.

• 1:04:01Speaker 06

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